Monthly Archives: May 2014

Capitalism & Freedom by Milton Friedman – Initial Thoughts

I’ve often said to my friends that living abroad is a lesson in economics. Even if you don’t have the slightest idea on how economics influences a government, or vice versa, or how the trickle down never drips into your bank account, you’ll get an understanding of these market leche-santo-domingoforces pretty quickly abroad. For example, when I lived in Santo Domingo, I heard many stories about what it was like to live in the tumultuous period of the early 2000’s. Could you imagine working in a supermarket and having to change the price of milk three times within one day? Or if you’re buying groceries for the family and you suddenly don’t have enough to purchase your weekly supply of necessary food items because the prices have jumped 5-10% in a day?

Here’s an excerpt from Wikipedia regarding the 2000-2004 period when Hipólito Mejía was president:

“During his government the country was affected by one of the worst economic crises, generated by the bankruptcy of three major commercial banks in the country, which resulted in high inflation, high country risk rating, currency devaluation and increasing local poverty.” (source: http://en.wikipedia.org/wiki/Hip%C3%B3lito_Mej%C3%ADa)

Hipolito-Mejia-CATEDRAL-16-AGOSTO-2000

Hipólito Mejía en 2000

Even during the two years I spent in the Dominican Republic from November 2010 to October 2012, the Dominican Peso was marked to the dollar at $0.36 to  $0.43, respectively. That’s a difference of 19.44%, a nice gain, with the caveat being that you’re on the US side. What economics urges us to consider is that there is always another side to every action or consequence.

Imagine being on the other side of that equation, where your investments: stocks or retirement funds, or your checking and savings accounts are devalued almost 20% in two years. With it’s proximity to the United States, the Dominican Republic purchases the majority of its goods from the United States. So as an individual, you lose 1/5th of your buying power, or even worse, if you’re an employer or an employee of a company that sells goods purchased from the United States you’re at a severe disadvantage and you’ll have to lay off staff just to keep the lights on.

When you live in an economy prone to wild swings like this and hear stories of the consequences for the average individual, it makes you feel blessed to be from a country that has such stability in their economy and in their currency. It was like I was shielded from the changes in the economy, and in fact, I know I prospered from it being someone who consistently converted my dollars and made purchases in the local Dominican economy.

This experience piqued my curiosity to understand how the decisions of the local government and the international government affected not just the overall population, but the communities and the individuals that I had come to know on a personal level. It is a great difference to take some esoteric theories and translate them into factors for why communities suffer from crime, delinquency, and unemployment.

After a few conversations with some friends back home, I wanted to get a primer on economics and capitalism to read during my journey’s in Latin America. Well, I now have a stack of economics books that I’ll be working through, but one near the top seemed like it was the most fitting when I wanted to know more about why the countries I was living in or traveling through didn’t experience the same fortunes from Capitalism. In other words, why didn’t they have the same access to opportunity that we did, or experience the same security of their property or benefit from low prices, or rest assuredly that their freedoms, religious, civil and economic Milton-Friedman-Capitalism-and-Freedomwere fully intact and preserved for tomorrow.

This book, “Capitalism and Freedom” by Milton Friedman has helped me sort through some initial thoughts, answered a few questions, but opened up a whole new world of new questions for what I try to reconcile in my mind when I read the newspaper here in Lima, Peru. It’s a definitely not an easy read, but it is a good start in understanding the frameworks for governments and how the structure of an economy influences, both positively and negatively, the freedoms of the individual. (I’m still working through the first three chapters.)

First of all, I thought the term, “Capitalism” was a pretty cut and dry definition, much like knowing the capital of the United States was Washington D.C. Everybody knows it and quotes it so often that there’s really no room for discussion. Quite often in America we believe in this “Capitalism,” like it was some unalienable right, part of the 10 commandments handed down from God, but some of us rarely understand what this definition means or the implications, both good and bad. Here’s a definition from Wikipedia:

Capitalism is an economic system in which trade, industry, and the means of production are controlled by private owners with the goal of making profits in a market economy. Central characteristics of capitalism include capital accumulation, competitive markets and wage labor. In a capitalist economy, the parties to a transaction typically determine the prices at which assets, goods, and services are exchanged.(source: http://en.wikipedia.org/wiki/Capitalism)

As you see, this is a pretty straightforward definition of Capitalism, and it can refer to a neighborhood market or a national economy, but as Friedman points out in his book, what we aim to have as a nation are a set of principles and ideologies that form our capitalist economy; what we really want to believe we have is “Democratic Capitalism,” here’s more:

Democratic capitalism, also known as capitalist democracy, is a political, economic, and social system and ideology based on a tripartite arrangement of a market-based economy based predominantly on a democratic policy, economic incentives through free markets, fiscal responsibility and a liberal moralcultural system which encourages pluralism.[1][2] This economic system supports a capitalist free market economy subject to control by a democratic political system that is supported by the majority. It stands in contrast to authoritarian capitalism by limiting the influence of special interest groups, including corporate lobbyists, on politics. (source: http://en.wikipedia.org/wiki/Democratic_capitalism)

What encompasses this latter definition is not just the practice of exchanging goods, but also the Scope: the structures of our political, economic and social structures, the ideology of “why” we believe this is good: Democracy – everyone should have a vote, or an ability to participate, and also how it plays out: Free Markets – we are all allowed to sell products (be business owners) and buy products (have choices as consumers) without the rigid structure or authoritarian rules of “who” buys/sells, “where” in places of purchase, and “how” certain price controls or limits.

Democratic Capitalism, therefore better preserves our rights and freedoms that the simple definition of “Capitalism.” Now, if you’re like me, you tend to think that any country that isn’t part of the traditional communist countries: Cuba, Russia, or China is basically a Capitalist country, because it’s not communist, you’d be wrong. A huge gap exists between Capitalism and Democratic Capitalism, and what Friedman explains in his book is that it’s often helpful to see these practices of government as they are compared to other forms of government, or in other words, “know what they are in terms of what they are not.”

Now, I realize, that from what I’ve seen in Latin America is that these are not true Capitalist countries, they have hints at being an Oligarchy:

Oligarchy (from Greekὀλιγαρχία(oligarkhía); from ὀλίγος (olígos), meaning “few”, and ἄρχω (arkho), meaning “to rule or to command”)[1][2][3] is a form of power structure in which power effectively rests with a small number of people. These people could be distinguished by royalty, wealth, family ties, education, corporate, or military control. Such states are often controlled by a few prominent families who typically pass their influence from one generation to the next, but inheritance is not a necessary condition for the application of this term.

Throughout history, oligarchies have often been tyrannical (relying on public obedience and/or oppression to exist) though others have been seen as relatively benign. Aristotle pioneered the use of the term as a synonym for rule by the rich,[4] for which the exact term is plutocracy. However, oligarchy is not always rule by the wealthy, as oligarchs can simply be a privileged group, and do not have to be connected by either wealth or by bloodlines – as in a monarchy. (source: http://en.wikipedia.org/wiki/Oligarchy)

Now this is starting to make a lot more sense as I weigh our American structure of Democratic Capitalism against forms of Oligarch. Many times in the newspaper I read that there are certain companies, organizations, or political groups that all have the same last name – that would be the form of power passing down from generation to generation. I can imagine you read the definition on Oligarchy like I did, and said, “Hmm, that sounds a lot like parts of America” and you’d be right. We don’t have a purely democratic capitalist society, but I’d like to believe that we have the belief that what we wrote in our Constitution is the standard that we should always be aiming to achieve. For that what we do have is a separation of powers, or a set of “checks and balances” to make sure that we are aware of what currently exists and what should exist as a true form of government.

Our freedom is preserved by a system that aims to consistently preserve our freedom. Many of the countries I’ve lived in, are not set up that way, or are not proficient in maintaining that structure.

Whew, this is a lot for one day. Let me take a break and return to this a bit later on.

When to Cross the Street – Immediately

I used to live in one of the most dangerous cities for pedestrians: Santo Domingo, Dominican Republic. I remember sitting in a conference where the speaker gave us the most recent statistics in Latin America relating to traffic accidents, deaths, and pedestrian fatalities. It’s certainly not the kind of information you want to hear on an empty stomach, nor the kind that would make momma proud in an email back to home.

Here in Lima, Peru, a city 2.5 times the size of Santo Domingo, I feel like getting through traffic is even more perilous. Not a week, or should I say, a couple of days goes by without a report on a serious accident on a major thoroughfare or highway, and unfortunate cases of pedestrians being involved in traffic accidents. Traffic here feels like it’s a war between the drivers, and then when the pedestrians want to cross, they become the new enemy, because they represent an tráfico-limaimpediment to their progress (and maybe a better target because their lack of defense). I understand this frustration, many times I’ve been in a taxi and have had to wait 30-40 minutes to go just a few kilometers.

So here’s a statistic that’s not all that comforting from the Inter-American Development Bank from 2012 on road safety :

” . . . more than 100,000 people are killed every year in traffic crashes in Latin America and the Caribbean. Compared with other causes of untimely deaths, road incidents take more lives each day (about 275) than HIV-AIDS does (156). At 17 deaths per 100,000 inhabitants, this region’s roadway fatality rate is nearly double that of higher income countries. (source: http://www.iadb.org/en/news/webstories/2012-08-22/making-road-safety-a-development-priority,10090.html)

I go to eat lunch at a place near my apartment just about everyday called “El Principe.” It sits o Berlin Street, a main corridor for all types of vehicles traveling through the district where I live. There’s stoplight just before this section of Berlin, and all throughout Berlin there are restaurants, bars and two hostels. It can be a traffic nightmare, so vehicles are looking for ways to pass through it as quickly as they can. This usually means breaking the law, and sometimes that means getting caught (maybe “rarely” is a better term than “sometimes”) like the guy driving the Audi R8 that got pulled over right in front of the El Principe. (Lunch at EL Principe will cost you $3.15. Quite a contrast eh?)

This post isn’t about the (awful) state of traffic of Lima, as I could write a couple hundred posts about that, instead it’s about the ability to recognize an opportunity quickly. I have to cross Berlin Street everyday and usually this means that I have a 45 second window from when vehicles start revving down the bowling alley to the unsuspecting pedestrian pins. Everyday on my approach to lunch I have to assess my current walking speed as I near my beloved lunch spot. If I miss the traffic window it means I’ll have to wait a good two minutes and even more tragically, miss an open table at the ever popular El Principe.

“Where am I in the traffic window?” “Did it just begin? Is it ending? Am I going to get my table or be frustrated and hungry on the other side of the street.”

These are the questions I think about, and oddly enough, after almost eight months here, I can make this decision in a split-second. Amazing.

I should focus this ability in other “equally important” areas of my life.

Ride it Out: Make Good Decisions on Which Bus You Plan to Board

I’ve ridden hundreds of buses during my time in Latin America. I stopped counting a couple years ago because it became such a part of my life that I didn’t even think about it. What I haven’t forgotten though, are the times that I’ve gotten on a bus that was headed to the wrong destination. (The dramatic irony here is that the bus was not wrong in it’s course to a  destination, but I was) Whether it was Guatemala, Nicaragua, or the Dominican Republic, there were many times when I had been nervously sitting in a seat waiting for my stop to come, and it never would. Then I would ask the conductor or the attendant and they would seal my fate and say to me, “This bus does not stop there. You’ll have to get off and transfer at the next station.”buses-of-guatemala-3

There a few things less enjoyable than realizing that you got on the wrong bus and you are now headed in a direction you don’t want to go, and you cannot get off. You try and protest, and ask them to let you off, but it’s a highway, it’s dark, and you don’t know where you are. They aren’t going to put you a situation you don’t belong, (even though that’s what you’ve done to yourself); they are going to take care of their passenger. You’ll just have to ride it out.

A similar phrase in English is, “You’ve made your bed, now lie in it.” meaning you have to take responsibility for where you’ve put yourself and the decisions you’ve made. I feel like there’s a bit of injustice considering the effects of this phrase. Many times the passenger is innocent and only has with them an intention to get to a destination, and now they are not only delayed, but their safety is in jeopardy. That’s hardly the idea behind someone needing to take responsibility for their actions. But as I’ve seen time and again in my travels, it’s not necessarily a question of justice or injustice, it’s more about ignorance versus knowledge, a choice of bus routes and ignorance stings whether or not you know better.

I had seen a movie about Mexican drug trafficking awhile ago, but because of it’s explicit content, I would wait until it comes out on TV if you have a desire to see it, but anyway it had an interesting quote that I’ll copy here:

“I would urge you to see the truth of the situation you’re in, Counselor. That is my advice. It is not for me to tell you what you should have done or not done. The world in which you seek to undo the mistakes that you made is different from the world where the mistakes were made. You are now at the crossing. And you want to choose, but there is no choosing there. There’s only accepting. The choosing was done a long time ago… Are you there Counselor?”

I find that sometimes I am much like the counselor here, trying to go back in time to retrace my steps and un-make the decision that I made a short while ago, but like it’s referenced in this quote, the consequences of a decision take place in a world that is different than in which they were made. There is no going back, there is only accepting the current situation, and waiting until the next stop to get off.

I think about this “permanence” of consequences when I visit some of these communities in Lima where we hope to pursue the extension of our microlending program to schools. Are these schools, these communities, these children on a bus route in which they can only switch seats but they cannot get off? Or can we change the destination?

“So Good They Can’t Ignore You” thoughts from the book

I’m reading one of the best books I’ve read in the past couple of years. What’s amazing to me is that it precisely and concisely encapsulates so many of the thoughts I’ve had over the past few years in Latin America, as well as the genesis of this career move over four years ago.

Cal Newport is the author of the book called “So Good They Can’t Ignore You: Why Skills Trump Passion in the Quest for Work You Love. The first part of the title is a reference from the actor/comedian Steve Martin who, when asked to dispense advice to up and coming artists in an interview with Charlie Rose in 2007, basically said that you’ve got to practice relentlessly and hone your craft so that it will be impossible to ignore what you’re doing. When you get so good, they can’t ignore you, you’ll just be oozing confidence and this will speak louder than any press release.

So Good They Can’t Ignore You

Newport claims that by building up “career capital” – the rare and valuable skills that employers are willing to pay for – you will eventually land a great job that you’ll be passionate about. This of course, flies in the face of convential wisdom which is “follow your passion and the job will come to you” which is actually pretty rare, and maybe it’s even misinformed. As he shows, some of our favorite geniuses, Steve Jobs, Mark Zuckerberg, Bill Gates, achieved the success they are now know for by being incredibly good at what they do, and arrived at their passion after years of hard work.

But if you follow the traditional route of “follow your passion,” you’ll fall prey to the great career mistake that countless 20-something pioneers make: build up enough courage to quit your day job to pursue your passion. What ends up happening is that the individual tries to bridge the gap of where they currently are and where they want to be with enthusiasm and passion, and worry about producing income later. As we all know, the rule of the working world is that people will only pay for something if you’re good at it, and if you’ve got no income, your career dreams can quickly dissipate.

I know there are tons of travel blogs and people hawking advice on how to quit your job and travel, but the reality is that a traveling lifestyle is only sustainable up until the point that your savings run out. To make money off of a blog or web site, you’ve got to be able to sell some product or service people are willing to buy. But what ends up happening is that these bloggers, and they are legion, have a wonderful journey (a journey to write home about, that much is true, and a worthy goal in itself), but they do not have much to sell other than the travel photos they’ve taken and the unusual stories they’ve collected.

In some ways, I feel like I could have made that mistake. I had so much excitement about jumping into a new lifestyle, one where I would be able to impact people living in economic poverty and providing them with hope and microloans, but interestingly enough, I didn’t have a lot to offer in the beginning, not even a modicum of Spanish ability. What saved me, I suppose, is that a great organization, HOPE International believed in me and put into a place where I could be useful and grow professionally. Even though I had five years of work experience, that career platform doesn’t necessarily translate to effective overseas Microfinance operational success.

What I’ve learned, has been four years in the process. What I’ve seen now, as the current program manager of the Edify program in Peru, is that there are a multitude of skills that an organization like Edify or HOPE International are looking for, and the only way you get to have a position where an organization pays you to be there is to make yourself great at these skills. So while many people have the desire to serve, to learn a language, to help, the real, impact-making jobs can only be staffed by people with specific abilities, and are good at what they do. This is kind of career decision I chose, and this set of specific skills is one that I continue to improve.

Endurance and Pacing in the Movistar 10k

imagen-movistar  This past weekend I ran the Movistar (phone and cable company) 10K with 16,000 of my closest friends. I hadn’t been training all that much for the competition, but I had run a decent amount up until race day. My goal was to break 55 minutes and to not stop. A lot of times I have a habit of setting out to do a monumental amount of kilometers only to find that I can’t keep the pace and have to slow down and walk. I didn’t have to stop this time, I kept my pace, but one thing overwhelmingly slowed me down: traffic!

I crossed the start line at approximately 8:33, a good three minutes after the start time because I was stuck in a wave of people. So it took nearly four minutes for thousands of eager runners to cross, but as I quickly found out, they were all quite excited to start, but didn’t share the same exuberance for running. I had to abruptly slow down to not smack into the runners before me. There was no order to the race, no slower joggers on the right, and faster joggers on the left. It was all just a free for all in the streets, and therefore the race spilled out on both sides into the grace and onto the sidewalk.

movistar-limaIt became incredibly frustrating to find any sort of path through the madness as the lack of order intensified. Runners were confined to slowing down to the speed of the joggers in front of them or waste precious energy by zig-zagging through the masses. I wasn’t about to sprint through the mess like so many of my peers, because it all seemed fruitless; as far as my giraffe-like status allowed me, I could see that it would be this way for at least a kilometer.

There was no way to escape the slow pace.

For at least 4 kilometers, a bit over 2 miles, it was like this. No room to run and it was hot! Not because of the weather but because of the magnitude of runners, it was like running in a heat cloud, only to escape the current cloud and land in the next heat cloud. I was so frustrated.lima-42k

Eventually things subsided at around the 6 or 7 kilometer mark, and I was picking up speed, but what had happened was that I had already set my pace and was comfortable in it. I had spent roughly 70% of the race running at a pace that wasn’t my goal, and now it felt too difficult to change it. I had exhausted a lot of my energy, and was solely focused on finishing.

I finished, it was fun, and I had a blast with my girlfriend and her friends. Well worth the time involved.

Got me thinking about “pacing” in life. How easy it is to stay with the pack, or burn up your energy when you didn’t start out early, or just resign yourself to sticking with the masses. What did I learn? Train for it, build up your pace, and ensure that you start when you need to start to keep the pace that you intend to carry the entire race.

“It Depends” is not a Helpful Answer

Whether you’re asking about travel destinations before heading to a foreign country or financial implications regarding the impact on your future, you might often get the “it depends” answer from the “informed individual.” What’s worse, is that there’s not usually a follow-up with the likely scenarios of alternative A or alternative B, but just a smirky smile and a phrase: “Like with It_Depends  most things, it really depends on what you want.”

I feel like the questioner has already expressed what they want – they are looking for advice on a few alternatives and their implications from you, the supposed enlightened individual holding onto a bit of knowledge. I don’t know if it’s because people don’t want to be held responsible for an unfortunate outcome or possible dissatisfaction with the response, or if in fact, they really have no idea.

It makes me think about the nature of asking questions, and what happens often to me during travel in Latin America. Normally, I’ll find myself in a situation where I’m looking for a bus to a specific town or city, and when I inquire about the hours of departure for the proposed transport, I’ll sometimes get the terse reply, “Nope, that already left.” In dismay, I’ll turn around and figure out how else I could make my way to the destination. Experience has taught me that there are often many buses that leave on many schedules, and if I miss one, there is a high probability that another one could be leaving in two hours – whodathunk!buses-of-guatemala-3

To unpack this “question asking” situation little more, I will often find out later that there are often better or faster ways of getting to the destination that the initial responder(s) never told me about. That’s something else experience has taught me: ask the same question to many people, even if the first person told you “no” and you want to believe them.

It comes down to this: anyone receiving a question should be curious as to why someone asked them the question in the first place, and maybe delve into the motives for asking such a question. Someone who is asking about a bus for a specific destination wants to go there, their priority is getting there, and they may not care that a bus already left if another was set to leave soon, and could be equally be satisfied if another station with similar bus travel was located nearby.

Instead, I think some people just take the question as a one-off situation: they were asking about that specific bus and that specific route, instead of the purpose behind the question. Many just choose to deflect the question and move on. They don’t care about being helpful. Not all people are like this though. I find in places that have high quality service will not only tell you that something isn’t possible at the moment, but how it can be possible later – they see the main-questionsoriginal purpose for asking and take a moment to help you out. They see through the current roadblock and tell you how you can get to your ultimate destination.

Which is why I think the answer of “it depends” is so frustrating. Someone isn’t asking because they want you to engrave your answer in stone or testify in court, they are asking for themselves for more information relating to the overall purpose of their goal, you’re just the intermediary.

When people usually ask me, “How long do you think it takes to learn Spanish?” I never respond with “it depends” because even though it’s true, it’s simply not helpful, and they aren’t asking me to teach them, nor for a specific number of weeks, nor will they hold me to whatever I say if they do choose to start the process. Quite simply, they are excited and are doing a bit of information gathering.

I usually say, “I think everyone can learn another language. What’s important is to be dedicated to the practice of it and find a way that makes it fun. I feel like someone can reach conversational fluency in a couple of months, and what’s amazing is that even after a week or two of dedicated practice you’ll feel confident of the progress you’re making and want to study even more.”

Now that wasn’t too hard to provide a little more guidance, now was it?

A $1.80 Bribe and Refuge Under the Chasis

I watch the news everyday at lunch to be better informed about the city in which I live and to continue my Spanish practice. For the first few weeks, all the new themes and trends were new and I filled many pages with new words and phrases, but then after awhile I needed only to write the uncommon or unusual words down. One of those new words made its way to me by a news story regarding a bus driver who got stopped by a local policeman for not having the appropriate regulatory licensing and stickers on his vehicle. combi mas

I’ve been stopped many times by police while riding or driving in a vehicle while I’m in a foreign country, and the scene usually plays out the same way. They stop me because I’m a foreigner, and say something to the sort of “It’s hot out here . . .” or “Christmas is just around the corner.” Which is a clue to me that if I want to leave this “routine” police stop within the next hour I should just fork over some cash out of goodwill to my fellow (hungry) man. The Spanish word for this is: soborno (a bribe).

Now, of course, they didn’t ask for a soborno, they merely commented that the hot weather was making them thirsty. If I should choose to give them money it would be towards the quenching of their thirst. Nothing more. Just man to man understanding.

Wcombihat was odd about the current news story I was watching was that they caught on film the driver handing over money to the Policeman. The driver knew that he was in trouble. No documents, and a fine was coming his way, and probably he had a few more unpaid fines that would come to the surface if they took him in. He thought to precede this disaster by handing over some money, ever so discretely to this policeman. He gave him a 5 sole coin which is about $1.80.

Could this policeman be bribed with such a paltry amount? Could he be bribed with $18 which is 50 soles? Or for $180 for that matter? Who is to know really. What we do know was that the policeman did have his camera filming the episode from his vehicle. We all know that big brother will influence behavior.

What you’ll find out very quickly in Lima, and throughout Peru, is that these small buses, called “combis” are incredibly common, and are driven by those who live in economic poverty and serve those who can only afford to pay the 20 cent or 50 cent fare, and not a taxi – which could cost $1 or $1.50. Put yourself in the shoes of someone who has to make financial decisions regarding of less than a dollar, and you’ll get an idea of what it’s like to be a driver of a vehicle who can only charge 20 or 50 cents. You’ve got to pick up a lot of passengers to make the kind of income to have any sort of living wage in Lima.

Moving onto the next story, the camera was placed low, on the pavement of the chasis of another small bus, a combi, showing a 20 year-old man, screaming and clinging to the exhaust pipes of the vehicle he had been driving just moments ago. He was stopped at a routine checkpoint and when he wasn’t able to produce his documents, nor account for the 30 some traffic violations he hadn’t paid. He did the only thing he could think of in that moment to save his current predicament. He dove under the bus and held onto metal structure and clung for his life (the metal was probably still hot from just being driven). They pulled him out kicking and screaming (literally). The news had a field day with the absurdity of the scene.soborno

Chasis in Spanish is still “chasis” but the word here is desperation. Economic desperation. Now, I’m not condoning the poor decision-making, nor the behavior leading up to their arrests, but can you imagine being that desperate that you would try to bribe a police officer with $1.80 or scramble under the chasis of your vehicle to avoid getting taking to the police station because you knew what fate would await you?